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International: World Trade Organization Addresses Trade Disputes between Major Trading Powers, Future of Global Trade Governance

(Oct. 19, 2020) In September 2020, at the World Knowledge Forum, an event aimed at “highlighting the importance of knowledge sharing towards a balanced prosperity of the global economy,” Deputy Director-General (DDG) Alan Wolff of the World Trade Organization (WTO) addressed the topics of trade disputes between major trading powers and the future of global trade governance. One of four WTO Deputy Directors-General, Wolff has been acting in place of former WTO Director-General (DG) Roberto Azevêdo since he stepped down in late August 2020, a year before the expiry of his mandate. The current selection process for a new DG is ongoing, with the second phase of consultations having ended on October 6, 2020.

Wolff’s remarks highlighted the current cooperation challenges among WTO members, as well as the substantive differences, such as “differentiation for developing country status and approaches to subsidies disciplines.” In line with the international legal commitments of the Doha Declaration, WTO members who claim developing country status can benefit from longer transition periods under some WTO agreements, as well as unilateral trade preference schemes. Wolff noted the significance to the world trading system of the strong differences of views and interests among the two largest trading countries, China and the United States.

Nonetheless, Wolff emphasized areas of potential agreement among these countries, such as on rules for e-commerce and on fishing subsidies. He argued that agreement in these areas could lead them to support needed reforms to the world trading system.

Wolff’s remarks also follow on the recent WTO Panel report (DS543) on the dispute between China and the United States regarding tariff measures on two lists of goods from China issued in accordance with Section 301 of the U.S. Trade Act of 1974 (19 U.S.C. § 2411). The panel concluded that the additional duties of 25% on the products specified by the U.S. are prima facie inconsistent with article I:1 and article II:1 (a) and (b) of the General Agreement on Tariffs and Trade (GATT) 1994 and that the U.S. did not meet its burden of demonstrating that the measures are justified under article XX(a) of GATT 1994 (measures necessary to protect public morals). The panel, therefore, also did not inquire into the second part of the “exception” analysis—whether the measures satisfy the requirements of the chapeau of article XX at section 1.9.

It is also worth noting that the panel report did not address China’s third claim against the U.S.’s imposition of Section 301 tariffs—namely, that the measures at issue appeared to be inconsistent with the U.S.’s obligations under article 23 of the Dispute Settlement Understanding (DSU). Article 23 of the DSU prohibits any unilateral retaliation measure without the authorization of the WTO Dispute Settlement Body. However, it has been argued that because China also imposed simultaneous retaliatory measures on U.S. products, those measures would be inconsistent with China’s DSU article 23 obligations as well.

Within the WTO dispute settlement mechanism, panel reports are usually appealable to the WTO’s appellate body, which has not been functioning since 2019, to decide on appeals of trade disputes. The panel report adds to the list of contentious disputes between the U.S. and China regarding a variety of issues over the past several years, including China’s developing-country status, subsidies disciplines, and trade remedies, with 16 cases involving China as the complainant and the U.S. as respondent, and 23 cases involving the U.S. as the complainant and China as the respondent.